Vote on Creating Consumer Protection Agency Delayed
Thursday, July 23, 2009
House Democrats vowed Wednesday to redouble their efforts to create a new Consumer Financial Protection Agency and to battle banking lobbyists and other critics who have been chipping away at support for the measure.
Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, said that the financial industry's "highest priority is killing this agency."
"I've been disappointed," he said at a news conference alongside consumer advocates and several Democratic lawmakers from his committee. "I didn't expect them to cheer for this. But I've been disappointed at the energy they're putting" into fighting it.
Frank had initially planned for his committee to endorse a bill creating the new agency by the end of July, but this week he postponed the vote until lawmakers return from recess in September. While he said part of the reason for the delay was the crush of so much other business winding its way through Congress, Frank acknowledged that the measure "became somewhat more controversial than I expected."
Frank said he plans to hold a "national debate" over the merits of the new agency, which the Obama administration proposed as part of its efforts to reform the financial regulatory system. The administration's proposal would give the agency broad powers to oversee a range of financial products, from mortgages to credit cards, in an effort to safeguard Americans against deceptive and abusive lending practices.
"Frankly, if I were the bankers, I would not invite a debate" over whether financial institutions had adequately protected consumers, Frank said. "But that's what they want, and I think that's what we will have."
The proposal has encountered stiff resistance from financial and business interests, who argue that a new agency would add an additional layer of government regulation, increase costs, stifle innovation and curtail choices for consumers.
Frank's decision to delay the consumer protection debate marks a small victory for the banking industry, whose representatives had urged lawmakers to move cautiously. It also creates some unease among advocates of the new regulator, who fear that financial lobbyists will successfully chip away at meaningful reform as time passes.
"They've hired three lobbyists for each one of us," Rep. Maxine Waters (D-Calif.) said of the financial industry on Wednesday. "They are running up and down these halls, trying to convince people" that a new agency isn't necessary.
A coalition of nearly 200 consumer, labor and civil rights organizations, known as Americans for Financial Reform, plans to spend much of the summer trying to convince people otherwise. Its members plan to spend much of the summer spreading out across the country in an effort to create grass-roots support for robust financial reforms.
Scott Talbott, chief lobbyist for the Financial Services Roundtable, which opposes the creation of a new agency, said his group will spend the coming months making its case as well. "We hope the extra time will be used to engage in a discussion about the best way to protect consumers," Talbott said. "That's where the debate should be."
House Republicans plan to introduce their own version of regulatory reform legislation Thursday that differs in some fundamental ways from the administration's proposal. For instance, they propose consolidating several existing federal regulators into one agency with a consumer protection office, rather than creating a new agency. Also, the proposal would scale back part of the Federal Reserve's authority.
The Obama administration on Wednesday also delivered proposed legislation to Capitol Hill that would create a structure to monitor risk across the financial system. Under the administration's proposal, the Federal Reserve would serve as the systemic risk regulator, but a Financial Services Oversight Council made up of various other regulators also would gather and coordinate information about systemic risk.